What changed
Previously, RBI approval was mandatory for transferring assets of LO/BO/PO to WOS/JV/others in India. Now, AD Category-I banks have been delegated this power, subject to strict conditions including auditor certificates, no revaluation, and sale consideration not exceeding book value. The change aims to streamline closure processes for foreign offices.
What it means for you
Banks can now handle asset transfer approvals directly, reducing turnaround time for foreign entities exiting India. However, they must rigorously verify compliance with operational guidelines, tax payments, and ensure no revenue expenses are capitalized. This increases operational responsibility and audit scrutiny for AD banks.
What you must do
- Update internal procedures to process LO/BO/PO asset transfer requests under delegated powers.
- Verify that LO/BOs have submitted AACs, obtained PAN, and registered with ROC; POs must comply with initial reporting and annual CA-certified reports.
- Obtain statutory auditor certificate detailing asset acquisition, depreciation, book value, and sale consideration; ensure no revaluation and sale price ≤ book value.
- Confirm assets were acquired from inward remittances and exclude intangible assets like goodwill; check no revenue expenses are capitalized.
- Ensure all applicable taxes are paid before permitting transfer, and subsequently enforce closure of LO/BO/PO as per existing circulars.
Who it affects
AD Category-I banks, Foreign entities with LO/BO/PO in India, Wholly Owned Subsidiaries and Joint Ventures of foreign entities
What documents are needed for asset transfer approval?
A statutory auditor certificate with asset details (date of acquisition, original price, depreciation, book value, sale consideration), confirmation of no revaluation, and proof of inward remittance for asset acquisition.
Can AD banks approve asset transfers for any LO/BO/PO?
Only for LO/BOs adhering to operational guidelines (AAC submission, PAN, ROC registration) and POs complying with initial reporting and annual project status reports. The foreign entity must intend to close its Indian operations.
What happens after asset transfer is approved?
AD banks must ensure closure of LO/BO/PO as per existing circulars (e.g., para 5(iii) of Circular No.24/2009 for LO/BO, para 5 of Circular No.37/2003 for POs). Credits from asset transfer are permissible, and documents must be preserved for audit.